Thursday, December 27, 2007

duties and liabilities of promoters

The term 'promoter' or 'company promoter' may be defined as a person who thinks of forming a company, and actually brings it into existence. This term is used in many company matters. The Companies Ac itself uses it in various sections (62, 69, 76, 478 and 519) and impose liability .on the promoters. But it will be interested to know that the term 'Promoter' has not been clearly defined in the Companies Act. Moreover, it has also not been clearly defined by judicial interpretation. Justice Cockburn (in Tlvcross.v.\'. Grant) defined a promoter as "a person who undertakes to form a company with reference to a given project and to set it going and takes necessary steps to accomplish that purpose." In the words of Brown, LJ. "The term promoter" is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence." Thus, the promoter is a person who originates the idea of starting a business, plans the formation of

a company, and actually brings it into existence. He is the person who does the necessary preliminary work incidental to the formation of the company. In simple words, a promoter is a person who brings a company into existence. Whether a person is a promoter or not is a question of fact in each case. Much depends upon the nature of the role played by him in the promotion of the company.